Employment Rights Bill

Lord Vaux of Harrowden Excerpts

Committee stage
Wednesday 21st May 2025 Lords Chamber

Debate on whether Clause 23 should stand part of the Bill.

[Lord Vaux of Harrowden (CB)]

My Lords, we now come to the general subject of unfair dismissal rights from day one, which we have just touched on in relation to apprentices. Many of the same arguments are going to apply more widely. For me, this is most damaging part of the Bill because the unintended, but well understood, consequence is that it will damage the life chances of the young and the most vulnerable. I thank the Ministers for their time last week; I am not sure if I persuaded them, but I will try again now.

At Second Reading, I asked why these changes are required. What is the evidence that there is a genuine problem, or that the qualifying period of two years is being abused in any material way? The Minister did not answer the question, so I have therefore given notice that I intend to oppose the question that Clause 23 and Schedule 3 stand part of the Bill, so that I can probe further into what problem these changes are intended to solve.

Rather than hearing my views on the subject, I am going to tell noble Lords what the Government’s views are, and what they think the impacts of these changes to the qualifying period will be. According to the impact assessment,

“it is likely employers will make changes to hiring, dismissal and management practises to minimise the risk of litigation for dismissal and minimise unproductive employee-job matches. The burden of these changes could be in the hundreds of millions per year”.

It goes on to say:

“The impact on businesses is expected to be negative and driven by familiarisation costs, and administrative costs from providing a written reason for dismissal, as well as the costs associated with additional early conciliation and tribunal cases, which is also likely to create additional burdens for the Employment Tribunal system”.


So, the Government agree that there will be a substantial cost to business, an increase in litigation risks and additional burdens on the tribunal system. They also state that these impacts will fall disproportionately on smaller businesses. I assume that nobody in this Chamber thinks that any of those are a good thing.

More importantly, what are the impacts on employees, especially those who are trying to find work? The impact assessment is pretty clear on that too. It says that

“there is some evidence of a negative relationship between stronger dismissal protections and hiring rates … this suggests that if not implemented with care ‘Making Unfair Dismissal a Day One Right’ could damage the employment prospects of people who are trying to re-enter the labour market, especially if they are observed to be riskier to hire (e.g., younger workers with less experience, ex-offenders, etc.)”.

It later says that

“there is evidence that the policy could negatively impact on hiring rates. For example, employers may be slower to take on workers due to the liability and increased protections, particularly for those that are seen as riskier hires”.

Again, I cannot believe anyone thinks those are good things.

The Government accept that this policy will create costs in the hundreds of millions for businesses, add burdens to the already stretched tribunal system and, most importantly, damage the hiring prospects—the life chances—of the very people we should be helping to get into employment. I hate the term NEETs, but we have heard a number of comments about the nearly 1 million young people who want to get into work. It goes directly against the Government’s admirable policy to get people off welfare and into work. So, why do this? Surely there must be some hard evidence that the current two-year qualifying period is causing some genuine problems, or evidence of material abuse, to justify these changes that will have all the damaging consequences that the Government themselves accept.

However, the impact assessment makes no such claims. It provides no evidence whatever that there is a problem. It simply makes a number of very vague and unquantified statements about people benefiting from increased job security. For example, it suggests a direct benefit to households driven by the welfare benefit arising from increased job security, with absolutely no attempt to quantify it. It also goes on to say that there are benefits from

“additional settlements and awards from additional early conciliation and employment tribunals”.

That last one really is extraordinary. This Bill has been described as a bonanza for employment lawyers; the Government appear to be confirming that, and actually seem to be suggesting that it is a good thing.

To read or listen to what the Government say, noble Lords would be forgiven for understanding that there are currently no protections from unfair dismissal for employees during the qualifying two-year period. That is quite wrong. There is a whole list of reasons for dismissal that are automatically unfair from day one. I will give a few examples, rather than go through the whole list—I do not want to keep everyone here all night. They include dismissal for reasons of a protected characteristic, such as age, disability, race or religion, et cetera; for being pregnant or on maternity leave; for being a trade union member or representative; for taking part in industrial action; and for being involved in whistleblowing. There are many others. So, let us stop this idea that new employees are unprotected from day one. It is just not true.

I ask the Minister, as I did at Second Reading, when she did not answer: why are the Government doing this? What evidence do they have that the qualifying period is really a problem? Presumably, there must be some tangible benefits from the policy to justify all these disadvantages that the Government have described. What are they?

The amendments in the name of the noble Lords, Lord Sharpe and Lord Hunt—and happy birthday to him—would require impact assessments of the changes, which I support, but surely it would be better to get this right in the first place. The impact assessment does say:

“The impact of hiring and labour mobility will ultimately depend on the final regulations on what is permissible in the ‘initial statutory period’ of employment”.


That is absolutely right, and that is what the rest of this group tries to deal with: to reduce the negative impacts of this change.

Paragraph 3 of Schedule 3 says that the Secretary of State may make regulations about dismissal during the initial period of employment, which is generally called a probationary period. My Amendment 104, along with Amendment 334, is intended to make it a requirement that the Secretary of State “must” make, rather than “may” make, such regulations. I thank the noble Lord, Lord Morse, for his support on this and other amendments. He sends his apologies that he is unable to be here tonight.

As the Bill stands, the two-year qualifying period can be abolished and not replaced with anything. I understand that is not the Government’s intention, and we heard earlier about the nine-month preference, but it is what the Bill says. Having no probationary period at all would be extremely damaging, so it is important that it should become a requirement that these regulations are issued, and not just a “may”.

My Amendment 108 would ensure that any probationary period is at least nine months long. What is important is that the employer should have adequate time to assess whether the new employee is right for the business, including by giving them a good chance to get up to speed through training and so on. I agree that the current two-year period is very long, and from discussions I have had with business groups and from my own experience in business, I am confident that the shorter period would be acceptable to most businesses. I think the Government’s suggestion of nine months is workable, and that is what I have proposed in the amendment, so I hope it is not particularly controversial from that point of view.

The other critical factor for a probationary period is that it must work in a way that enables an employer to give the person the benefit of the doubt, rather than acting as a disincentive to hire them, especially for the riskier hires that the Government described and that I mentioned earlier. For that to be the case, it is essential that the employer can dismiss them without having to give a reason during the probationary period.

--- Later in debate ---

[Lord Hendy (Lab)]

Of course; that is always the way whenever there is litigation. Whatever the subject matter, people do not want the burden of defending the case and the people bringing the case do not want the burden of bringing it. That is just the reality of litigation.

I will say one last thing before I sit down. The argument that the noble Lords and noble Baronesses opposite have put forward is all about what they perceive to be the consequences of this matter, which my noble friend Lord Monks just addressed. But nobody can seriously advance the case that employers should have the right to dismiss anybody unfairly and without recourse to the law.

[Lord Vaux of Harrowden (CB)]

Does the noble Lord accept that these are not simply arguments that people around this Chamber are putting forward but matters that are in the Bill’s impact assessment? It is the Government’s own statement that the Bill will have these impacts. It is not being made up by any of us: the Government accept that this will be the impact.

[Lord Hendy (Lab)]

That may very well be, but it still does not remove the fundamental point: what is being proposed is a category of worker who can be dismissed unfairly for the most extreme reasons without resort to any justice.

--- Later in debate ---

[Baroness Jones of Whitchurch (Lab)]

The noble Baroness is absolutely right. She will know that I share her ambitions for the tech sector. The UK remains the number one country for venture capital investment, raising $16.2 billion in 2024—more than either Germany or France—and since last July we have secured £44 billion in AI investment. Strengthening employment rights and giving day-one protections can help support talented people to take the leap into a start-up company.

I turn to Amendment 104, tabled by the noble Lord, Lord Vaux. Setting a statutory probationary period during which light-touch standards will apply is a crucial part of our plan to make work pay. I can reassure the noble Lord that setting out the detail in regulations is fundamental to fulfilling this commitment. It is not necessary to make this a requirement in legislation.

The noble Lord, Lord Vaux, asked a number of questions. He, the noble Baroness, Lady Coffey, and others asked why the Government are doing this. The UK is an outlier compared to other OECD countries when it comes to the balance of risks and entitlements between the employer and the employee. We believe that it is an important principle that employees should have greater security at work. Our reforms will mean that around 9 million employees—31% of all employees —who have been working for their employer for less than two years will have greater protection against being unfairly dismissed.

[Lord Vaux of Harrowden (CB)]

I hate to interrupt the noble Baroness at this late hour, but that is just a repeat of what has been said before; it is not a tangible quantified reason for doing this. Yes, for a short period of time, they will have greater security in theory, but the downsides of this—they are in the Government’s own impact assessment—are really clear. The Government say that this will reduce the life chances of people who are riskier hires. It will cost business hundreds of millions of pounds. There is no quantification of that benefit against those downsides, and I am still not hearing that.

[Baroness Jones of Whitchurch (Lab)]

I will talk about the impact assessments in more detail shortly, but the noble Lord will know that it is a lot easier to identify the costs in impact assessment than the benefits. We have worked with academics who are looking at this subject. I reassure the noble Lord that we have looked at this and are confident that the benefits in this particular case will outweigh the risks.

I will pick up the point made by other noble Lords about cultural fit and other reasons why an employer might want to dismiss somebody during their probationary period. Dismissal for “some other substantial reason” is a catch-all category designed to allow employers to terminate an employment contract where no other potentially fair reasons apply. There can be cases where dismissal is legitimate and reasonable; “some other substantial reason” dismissals depend on the facts and circumstances of the employment relationship. “Some other substantial reason” is broad, and case law supports personality clashes in workplace teams or a business client refusing to work with an employee being a potentially fair reason for dismissal. The Government do not believe that an employee not being a cultural fit within an organisation should be a fair dismissal per se. We would expect an employer to be able to dismiss someone fairly only if any cultural misfit was relevant in a reasonable manner to the employer’s business objectives and the needs of the workplace.

The noble Baroness, Lady Noakes, mentioned employees with spent convictions. I gently point out to her that dismissing an employee solely for having spent convictions is currently unfair and potentially grounds for an unfair dismissal claim—

--- Later in debate ---

[Baroness Jones of Whitchurch (Lab)]

I can assure the noble Baroness that not only have we thought about this but we are working very closely with the business sector to get this right. We understand that some of these things will take time. It takes time to change systems, and a lot of it is about changing computer systems for processing and so on. We are aware of this and, when the noble Baroness sees the implementation plan, it will reassure her that we have allowed space and time for it, as well as proper consultation with those who will be affected.

[Lord Vaux of Harrowden (CB)]

My Lords, it has been a long debate so I will try not to detain the Committee much longer. I thank the many noble Lords across the Committee who have contributed. It has been long because this is really important. I confess that I come out of the end of this debate feeling somewhat depressed. I still have not heard really why we are doing this, and what the real, tangible benefits are, to offset against the very real negative impacts, particularly on those who are looking for employment and are perhaps disadvantaged in one way or another: they have not worked before, they are young, they have a gap—we heard all the various examples. The Minister did not really address that point terribly clearly in her speech, and it is so important.

This may be, as the Government have regularly called it, a Bill for workers. However, as I said at Second Reading, it is not a Bill for people who want to work—the potential workers who were mentioned by the noble Lord, Lord Elliott. He stole my Charlie Mayfield quote, but I will not worry about that. It is true that Denmark has much easier hire and fire, and he was using that as a paragon of virtue because it allows people who are harder to hire to get into employment, which is so important.

In the interests of being constructive, I hope the Minister understands the real concerns about those people and the impact the Bill is going to have on them, and the negative impacts this section of the Bill will have. I hope that she will be prepared to spend a bit of time with us between now and Report to try to find solutions to those negative impacts, to minimise the problems and downsides that they will cause. I say to the noble Lord, Lord Monks: I am not making this up, or crying wolf, as with the national minimum wage, as the noble Lord suggested. This is what the Government say will be the impact. I cannot emphasise that enough. It is not me saying that; the Government say this will be impact. If we can try to work together before Report, to try to find ways of knocking the edges off this and reducing the negative impacts, that would be very helpful. With that, I will not oppose Clause 23 standing part of the Bill.

Clause 23 agreed.

Employment Rights Bill

Lord Vaux of Harrowden Excerpts

Committee stage
Tuesday 13th May 2025 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, like the noble Lord, Lord Fox, I am a little puzzled by the groupings between this and the previous amendments. I have gone the opposite route and decided to speak to this group rather than the last one, but everything that I say in this group applies equally to Amendment 75, which would have created a review of the impact of the changes on small and medium-sized businesses. This group would require impact assessments to carried out for the various other effects that the Bill would have—so really it is the same subject.

Frankly, a lot of this would not be necessary if the Bill had been properly thought through from the beginning, if there was not so much detail to be filled in later by regulation and, in particular, if a proper impact assessment had been carried out on the various changes proposed. The Bill will, by the Government’s own admission, impose costs on business, disproportionately on smaller businesses, of around £5 billion, and will, again by the Government’s own admission, have potentially negative impacts on employment opportunities for those with poorer employment records. It is deeply unsatisfactory that it should not have been properly impact-assessed.

The Regulatory Policy Committee rated the impact assessment as “not fit for purpose”. It is worth reminding noble Lords what it said:

“Given the number and reach of the measures, it would be proportionate to undertake labour market and broader macroeconomic analysis, to understand the overall impact on employment, wages and output, and particularly, the pass-through of employer costs to employees. The eight individual IAs and the summary IA need to provide further analysis and evidence in relation to the rationale for intervention, identification of options (including impacts on small and microbusinesses) and/or justification for the preferred way forward”.


It is damning that that was not done before the Bill was presented to us.

Now, before the Minister points this out, I concede that the statutory sick pay individual impact assessment is the only one of 23 that is rated as good—in itself a pretty damning statistic. However, the impact assessment for the monitoring and evaluation plan for the statutory sick pay part is rated as weak. The noble Lord, Lord Hunt, has already referred to the potential behavioural aspects that arise, which are not in any way covered in the impact assessment. In fact, there is a complete cop-out; it says, “We can’t do this because of the behavioural impacts”.

Sadly, these proposed amendments and Amendment 75 in the previous group are clearly necessary, as are the others that we will debate later today and throughout the Committee process. The five-year review that the Minister referred to earlier frankly does not cut it, given the significance of the measures in this Bill and how quickly how they will have impact. Five years is way too long to wait to understand whether it is damaging.

I do not wish to test noble Lords’ patience by repeating this speech multiple times during the process of the Committee, so I ask the Minister to take as read my support for proper and timely reviews and assessments of the impacts of this Bill as we go forward.

[Baroness Jones of Whitchurch (Lab)]

My Lords, as noble Lords have identified, we are now continuing the important debate on statutory sick pay and specifically to address the impact of these measures on businesses.

It is important to highlight that the statutory sick pay system, and the changes that we have brought about as part of this Bill, is designed to balance providing support for the individual with minimising the costs to the employer. This group of amendments, Amendments 74A, 74B and 74C, tabled by the noble Lords, Lord Sharpe and Lord Hunt, would require impact assessments on absenteeism, enhanced sick pay schemes, occupational health, and short-notice shift working.

As I mentioned earlier, and as the noble Lord, Lord Fox, has already identified, the Government have already undertaken a regulatory impact assessment which considered the likely direct business impact of SSP changes. This included considering the impact on small and medium enterprises and sectoral impacts.

Overall, in the regulatory impact assessment, the Government estimated that the cost of delivering these measures would be approximately £15 extra per employee, a relatively modest amount when compared to the positive impacts that these changes will have for employees and overall productivity. I thank the noble Lord for the three amendments tabled in this group, all of which would require impact assessments. I look forward to debating those with the other 23 or so requests for impact assessments that the Opposition have already tabled. We have a plethora of requests for impact assessments. I reassure the noble Lord that we are at the same time updating our regulatory impact assessment and operating a post-implementation review of the measures—so the Opposition’s requests are probably not necessary.

On the noble Lord’s Amendment 74A, requiring an assessment of the impact of the changes to SSP in the Bill on absenteeism, we acknowledge that overall sickness absence may increase as a result of this Bill. This is not a loophole, nor are the Government not considering businesses; rather, it is the very objective of these changes to enable the lowest-paid employees to take time off when they are sick. Under the new system, employees will be able to take the time that they need to recover from short-term illness without struggling through work and often risking the spread of infectious diseases such as influenza. Similarly, employees with long-term or fluctuating conditions should feel able to take a day of sickness absence to manage their condition to prevent it worsening. The noble Lord, Lord Hunt, suggested that employees might be encouraged to misuse the system. However, if employers have the right policies and practices in place, the risk of inappropriate absenteeism can and should be mitigated.

Additionally, the noble Lord’s amendment would be quite difficult to deliver in practice. There is not a standard measure of absenteeism versus legitimate sickness absence, and in many instances, it would depend on whether you asked the employer or the employee. The Government intend to build on the regulatory impact assessment and, as I have said, we intend to conduct a post-implementation review of the measures in the Employment Rights Bill.

I turn to Amendment 74B, to assess the impact of the reforms in the Bill on employers’ ability to continue offering enhanced sick pay and occupational health services, particularly in low-margin sectors such as retail. I appreciate the noble Lord’s concern about the potential impact on this matter, and the Government certainly agree that it would not be in anyone’s interest for there to be a rollback of occupational sick pay or occupational health provision. However, the Government’s view is that these changes will serve only to strengthen the link between the workplace and the employee. I question why any business would want to use these changes as a reason to reduce the support that they provide their employees to help them stay in, and return to, work.

The noble Baroness, Lady Fox, asked about the Government’s policy on getting people back to work, and she was right to raise the issue. We are talking about a balance here; when people are sick, they should have the right to be off sick. I also accept the point that she made that being at work can in itself be a healing experience, and we should not lose sight of that—that there can be a positive health impact from being at work.

I once again draw noble Lords’ attention to the Keep Britain Working review. As I set out earlier in the debate, Sir Charlie Mayfield will consider recommendations on how the Government can support and enable employers to promote healthy and inclusive workplaces and support more people to stay in or return to work from periods of sickness absence. That review is expected to produce a final report in autumn this year. I believe that much of what the Keep Britain Working review is doing will address the noble Lords’ concerns, and I hope this reassures them that the Government are taking this matter seriously. We look forward to the results of the review.

Finally, I turn to Amendment 74C, which seeks to review the effects of the SSP changes on shift management and short-notice scheduling in the workplace. As discussed in relation to Amendment 74A, the number of sickness absences may go up as a result of these changes. This is because it would enable employees to take time off when they are sick.

I again reassure noble Lords that the Government are committed to understand the impact of these changes on businesses. We intend to conduct a post-implementation review of these measures in the Employment Rights Bill within five years of implementation. Additionally, as I set out in the earlier debate, the Department for Work and Pensions conducts regular employer and employee surveys and will continue to do so, providing further monitoring of the impact of SSP changes on a range of employers and employees.

However, this amendment would require the Government to collect a significant amount of data from businesses on what noble Lords will understand is quite a wide range of issues. We believe that this would be administratively challenging for them to provide, particularly in less than six months. This is the very thing that the noble Lord is seeking to avoid—the extra bureaucracy that he has talked about. For example, asking employers, including SMEs, to accurately record and report to government the frequency of shift cancellations and redeployments because of sickness absence is not practical or reasonable.

We have had a worthwhile, short debate on these issues, but I hope I have persuaded noble Lords that we are on the case and therefore that the amendment can be withdrawn.

Employment Rights Bill

Lord Vaux of Harrowden Excerpts

2nd reading
Thursday 27th March 2025 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, I accept that the intentions behind this Bill are well meant, but I am concerned about the unintended consequences. There are some positives—the rules on fire and rehire, and bereavement leave, are just two examples—but overall I am afraid I have to conclude that the Bill will damage growth and, most importantly, the employment opportunities of the most vulnerable people. Others have mentioned omissions from the Bill. I am supportive of the comments that have been made on NDAs and on whistleblowing, and I look forward to seeing what comes up on those.

The impact assessment says that the Bill will impose costs of around £5 billion on business. Worse, it confirms that those costs

“will be proportionately higher for small and micro businesses”.

That goes directly against the Government’s drive for growth. Noble Lords need not take my word for it. The OBR said yesterday that changes would

“likely have material and probably net negative economic impacts on employment, prices and productivity”.

There is already evidence that small businesses are reducing hiring, so I hope the Government will be willing to consider constructive ways to reduce the burdens on SMEs.

Speaking of the impact assessment, the bar is not high, but this is one of the worst I have ever read. The Regulatory Policy Committee rated it not fit for purpose, stating:

“Given the number and reach of the measures, it would be proportionate to undertake labour market and broader macroeconomic analysis to understand the overall impact on employment, wages and output, and particularly the pass-through of employer costs to employees”.


It beggars belief that any Government would propose changes of this importance without carrying out such an analysis.

That problem is made worse because this is, in effect, yet another skeleton Bill, with much of the important detail to be added later by regulation. I counted 173 regulatory powers—I am glad that the noble Lord, Lord Hunt, came up with the same number—including 11 Henry VIII powers. That restricts proper analysis and scrutiny. At the very least, can the Minister confirm that all material regulations will be provided in draft before we reach Report, to allow at least some scrutiny of those important rules? It is not acceptable to continue having these endless skeleton Bills. We are seeing more and more of them.

Given the time limit, I will raise just two detailed issues. First, I agree that zero-hours contracts can be exploitative and that some tightening is required, but they can work well for people such as students, as we have heard, and we should try to retain some level of flexibility for them. More importantly, the new rules are likely to drive perverse behaviour. Basing future guaranteed hours on the previous 12 weeks is burdensome on businesses, but it may also mean that people will not be given extra shifts during those busy times. The unintended impact of the Bill might be that people get less work, not more.

Secondly, there is the introduction of day-one unfair dismissal rights. This will directly reduce opportunities for vulnerable people. That is not just my opinion, it is the Government’s opinion too. The impact assessment says:

“There is evidence that the policy could negatively impact on hiring rates. For example, employers may be slower to take on workers due to the liability and increased protections”—


I stress this last part—

“particularly for those that are seen as riskier hires”.

I am sure we all support the Government’s intention to get people off sickness benefits and into work. But, to achieve that, we need employers willing to employ them. Is this really the moment to introduce rules that will, by the Government’s own admission, make that less likely? Is there any real evidence that the two-year qualifying period is being abused? In my experience, the opposite is true. The qualifying period allows employers to give people with little experience or poor employment records the benefit of the doubt when hiring them in the first place and at the end of any initial probation period. Can the Minister please provide evidence that the two-year qualifying period is in fact a real problem? The only winners here will be employment lawyers, and the losers will be the very people the Government say they want to help.

We have heard lots of comments about this being a Bill for the workers. What it definitely is not is a Bill for those who want to work.

Data (Use and Access) Bill [HL]

Lord Vaux of Harrowden Excerpts

2nd reading
Tuesday 19th November 2024 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, like others, I think I am experiencing the same sense of déjà vu that has been referred to. As others said, one of the more welcome aspects of this Bill is that it is not the same as its predecessor, which was introduced by the previous Government and which was mercifully a casualty of the election. Many of us lost far too many hours of our lives on that Bill, which was, frankly, a bad one—others have called it egregious.

So, I am pleased that this Government have clearly taken account of those debates—perhaps some of those hours were not wasted after all—and have produced a slightly slimmed-down version. That, in part, is because some of the old Bill has been removed from this one, but I am afraid it is expected to reappear again; I hate to disappoint the noble Lords, Lord Knight and Lord Stevenson, but we are going to see those DWP bank account access clauses in a separate Bill. However, at least it will be a stand-alone Bill rather than tucked in the background of a two-inch-thick data Bill.

I will start with a general concern which the noble and learned Lord, Lord Thomas, mentioned, which is that of EU data adequacy, which a number of us raised in the context of the last Bill. The helpful letter from the noble Lord, Lord Ricketts, the chair of the European Affairs Committee, dated 22 October to the Secretary of State for Science, Innovation and Technology, sets out very clearly the

“significant extra costs and administrative burdens on businesses and public-sector organisations which share data between the UK and the EU”

that would be incurred if we were to lose that data adequacy ruling, which is due to expire in June 2025—so very soon. I do not think I have seen a response from the Government to that letter, so I would be very interested to hear what the Minister has to say on that. Although this Bill is clearly less contentious than its predecessor and the risk is therefore clearly lower, it is not zero risk, and we need to be careful to ensure that there is nothing in the Bill that risks significantly the loss of that ruling.

To that end, I would be grateful if the Minister could explain what assessment the Government have made of the risk of losing the EU data adequacy ruling and, perhaps more importantly, tell us the extent to which the Bill has been discussed with our European counterparts to ensure that there is nothing in it that is concerning them. Clearly, we do not need to and should not follow the letter of the EU data protection rules, but we should at least work with our EU counterparts to ensure that we are not risking the adequacy ruling.

Part 1 deals with so-called smart data. I welcome it but note that it consists mainly of a series of powers to regulate rather than any firm steps, which is a little disappointing. The only current live example of smart data that we have is open banking, which a number of noble Lords have referred to—maybe, one day, we will see a pensions dashboard; who knows? However, open banking has been rather slower to take off than had been hoped. It has been six or seven years since it was first mooted. I urge the Government to carry out a review of why that is, before they start to make the regulations that the Bill proposes around smart data. There are lessons to be learned from open banking, to ensure that what we do with smart data in the future is more successful. The claims that smart data will boost the UK economy by £10 billion over the next 10 years looks a little optimistic, especially as the impact assessment from the Department for Business and Trade accompanying the Bill fails to monetise any costs or benefits of the smart data elements. I think that the smart data concept is good but hope that we get it right.

Part 2 of the Bill deals with the digital verification services. Again, on the whole, I am supportive of this. The Bill should improve security of and trust in digital verification. As the noble Lord, Lord Arbuthnot, said, it is not about digital ID cards. However, a number of us raised a concern last time round. There is a danger that this could become a slippery slope towards a situation where people may find themselves compelled to use digital verification services and therefore excluded from accessing services or products if they are not able or willing to use digital verification. The “not willing” part of it is important. Some people are wary of putting detailed identity information online. I am increasingly wary, particularly as a resident of Dumfries and Galloway, where all medical records from NHS Dumfries & Galloway were recently hacked, stuck online for ransomware and probably published. Therefore, I have some sympathy with those who do not fully trust official systems. I am curious to hear what the Minister has to say in response to the comments from the noble Lord, Lord Markham, about increased cyber- security in the public sector, as that is a good example of where it has gone wrong.

I know that there is no intention on the part of the Government at this time to make the use of DVS compulsory, but it is quite easy to see other providers, such as estate agents, financial institutions and, as one noble Lord mentioned, employers, making it a requirement. While supportive, I think we need some protections to ensure that people are not excluded from services by that. I would be interested to hear the Minister’s thoughts.

On Part 5, the House of Lords Select Committee on the Fraud Act 2006 and Digital Fraud heard a number of times that banks and other financial institutions were unwilling to share data for fraud prevention purposes because they felt constrained by data protection rules. I suspect that they were wrong but am very pleased that data processing for the purposes of detecting, investigating or preventing crime is to be expressly included as a legitimate interest. I hope that the Information Commissioner will ensure that it is widely pointed out and that we will start to see greater co-operation between payment providers and the tech and telecoms companies where the vast bulk of frauds originate.

However, on the subject of the legitimate interest changes, I am concerned that the Secretary of State will be able to make changes to matters considered to be legitimate interests by regulation. That is a significant power in terms of data processing and potentially a retrograde step. It could also raise concerns with respect to the EU data adequacy points that I raised earlier. While the EU might be happy with what is currently proposed, the ability to change key aspects could raise alarm bells.

Other noble Lords have talked about automated decision-making, where I am also concerned about the weakening of rights. Currently, automated decision-making is broadly prohibited, with specific exceptions. This Bill would permit it in a wider set of circumstances, with fewer safeguards. In her introduction, the Minister seemed to indicate that the same safeguards would apply. As I understand it, that is the case only where special category data is used. I would be grateful if the Minister could explain whether I have got that wrong. It seems to me to increase the risk of unfair or opaque decisions. The noble Lord, Lord Arbuthnot, talked about the Horizon/Post Office scandal. That should certainly give us pause for thought. The computer does not always get it right. There are myriad examples of AI inventing false information and giving fake answers. It is called “hallucination”. The right to challenge solely automated decisions should be sacrosanct. Why have the Government decided to weaken those safeguards?

Finally, I am pleased to get on to a point that no one else has raised so far, which is an achievement. I note with relief that the abolition of the Biometrics and Surveillance Camera Commissioner has been removed. However, issues remain in these areas. In particular, the previous commissioner has described a lack of an overarching accountability framework around surveillance camera and biometrics usage. Can the Minister explain what the Government’s plans are for the regulation of surveillance camera and biometric use, especially facial recognition and especially as the use of AI expands into that area?

In summary, it is a much better Bill, but there is a lot of work to do.

Social Media: Catfishing

Lord Vaux of Harrowden Excerpts

Wednesday 30th October 2024 Lords Chamber

[Baroness Jones of Whitchurch (Lab)]

We are working closely with the Home Office and the Ministry of Justice on the implementation of the existing legislation because, as I say, a number of pieces of legislation are already on the statute book. Some capture fraud offences —I note the Fraud Act—and others capture online frauds, including romance frauds on dating apps and so on, which, sadly, are all too widespread. Those actions are being taken. We are talking about this to the Home Office, which is also on a learning curve in relation to how it can tackle these issues more robustly. We are carrying on our dialogue with it.

[Lord Vaux of Harrowden (CB)]

My Lords, the noble Baroness mentioned romance fraud and other frauds. Approximately 70% of fraud arises on social media platforms, particularly Meta, yet the reimbursement for fraud is all placed on the banks, and no liability applies to the social media platforms. What plans do the Government have to make social media platforms pay for their share of the frauds in order to incentivise them to do something to stop them?

[Baroness Jones of Whitchurch (Lab)]

We are acutely aware of this issue. We know that there is a live ongoing argument about it and we are talking to our colleagues across government to find a way through, but we have not come to a settled view yet.